How will the technology in your car keep up with the latest apps and features on your smartphone?
Short answer? It never will — at least not at the relative breakneck pace of new Apple and Android device releases. Automotive product cycles are too capital-intensive to be much shorter than about six or seven years. But in order to keep pace with the rapid rate of innovation in consumer electronics, auto manufacturers are shifting to a twin-track product cycle.
As cars and smartphones have become increasingly integrated, carmakers are challenged to ensure their products don’t lag behind the rapid pace of technological advancement. Because cars require expensive tooling, production, and distribution, product cycles are long. Longer cycles also allow time for customers to pay for their cars before redesigned models are introduced. Shortening overall product cycles could reduce vehicle resale value. A twin-track strategy would keep a six- to seven-year product cycle for expensive components while offering more frequent software upgrades.
Reckoning with the relentless march of technology was top of mind for automakers last week at the opening of the Geneva International Motor Show. In addition to product cycle tweaks, carmakers also expressed concerns that technology has the potential to usurp the relationship between car companies and their customers. Daimler chief Dieter Zetsche noted that carmakers risk becoming “the Foxconn of the auto industry,” a reference to the trade name of Taiwan’s Hon Hai Precision, a contract manufacturer of the iPhone, among other things.
A VW sales executive echoed Zetsche’s concerns:
“If the automotive industry does not want to run the risk of having its status downgraded to that of a hardware supplier, then we have to make sure we take advantage of the big technological trends ourselves.”
To keep from falling behind, carmakers have greatly increased capital spending for technology, but investors often worry they’re not seeing commensurate returns. However, the risks of not investing in technology are grave. If carmakers allow tech companies to be the software ghosts in their machines, they may be doomed to having their products commoditized. That fate befell the PC industry, and is happening to smartphones. If tech companies control the car’s brain, control of the body will be a race to the bottom on price. The stakes only get higher as the industry moves toward a future of sharing-based networks of autonomous electric cars.
Keeping pace with tech by implementing a twin-track automotive product cycle is a step in the right direction, but for most drivers, getting a software update requires a dreary trip to the dealer. Tesla offers remote, over-the-air (OTA) software updates, but most other car companies are playing catch-up. More widespread use of OTA updates will be a big money saver for the industry. According to IHS, automotive OEM cost savings from OTA updates will grow from $2.7 billion in 2015 to more than $35 billion by 2022.
But software updates are only as good as the connected car’s security, and, according to a recent survey of automakers and suppliers, security is not very good — mainly because security wasn’t a major concern when current connected car tech rolled out. Industry companies, including Fiat Chrysler, Bosch, and Delphi, reported that securing their connected car technology could take another one to three years. Security firm Veracode, which commissioned the survey, suggested car companies keep performance and infotainment systems separate to reduce the risk of hackers gaining control of driving functions through attacks on the infotainment system.
Veracode also said the best way to separate the two systems is to leverage the security expertise of the likes of Google and Apple and let them develop the infotainment systems, which would require much greater cooperation between the OEMs and tech giants. So carmakers face a catch-22. How do they control the core value of their products if more and more of that value is third-party ones and zeros instead of nuts and bolts?
James Bryant is an industry editor for Dun & Bradstreet. Based in Austin, Texas, he writes about issues affecting the global manufacturing sector. He’s been the company’s specialist on the auto industry for 15 years.
Image courtesy of Tesla.